Suven Pharmaceuticals share price rises 5% on CDMO firm Sapala Organics acquisition announcement.

Stock Market Today: Suven Pharmaceuticals share price gained more than 5% in the morning trades on Friday post its announcement regarding acquisition of Hyderabad based CDMO firm Sapala Organics on Thursday post market hours.

Suven Pharma share price that opened at ₹695.00, higher than previous close of ₹667.95, gained further more to ₹705 levels on the NSE, marking gains of more than 5%.

Suven Pharmaceuticals announcement on the exchanges said that that it has executed definitive agreements on June 13, 2024, for acquiring 100% of equity shares (on a fully diluted basis) in Sapala Organics Private Limited.

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Sapala Organics - Business and sales performance

The Hyderabad based Sapala Organics is contract development and manufacturing organizations (CDMO) that is focused on Oligo drugs and nucleic acid building blocks including Phosphoramidites & Nucleosides, drug delivery compounds (including GalNAc), Pseudouridine, amongst others.

Suven Pharmaceuticals in its presentation highlighted that Sapala Organics sales stood at ₹67 Crore with more than 45% Ebitda margins in FY24. Ebitda stands for Earnings before, Interest, Tax, Depreciation and amortisation.

Sapala Organics has a customer-base across the US, European Union and Japan; partnering on their New Chemical Entity (NCE) programs across project lifecycle. Sapala Organics has a strong Japan presence as its sales from Japan averaged around 20% of FY21-24e, as per the presentation.

Nucleic acid & Oligo building blocks market is expected to grow 18-20% CAGR (compound annual growth) over FY24-29 to $1800 million.

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Timeline expected for completion of acquisition

Suven Pharmaceuticals has agreed to initially acquire 67.5% by way of secondary transfer from Sapala Organics' existing shareholders. This represents 51% of the share capital of apala Organics on a fully diluted basis.

However post financial year 2026-27, Suven Pharmaceuticals will acquire the balance shareholding through secondary purchase, such that, post consummation, Suven will own 100% of the share capital of the Sapala on a fully diluted basis.

Avenues of synergies between Sapala and Suven

Among Synergies highlighted in the presentation are-

Customer cross selling- The Sapala Organics acquisition provided opportunity to sell nucleic acid chemistry capabilities to Suven and Cohance Life Sciences innovator customers.

The Platform will also have access to Sapala’s strong Japan legacy and Sapala Promoter is likely to to be a Strategic Advisor to Suven for business initiatives in Japan

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Leveraging manufacturing capabilities- Sapala will leverage Suven and Cohance’s GMP accredited manufacturing capabilities. This will enable higher entrenchment with Sapala’s existing customers and winning larger businesses and customers

Optimizing costs and best practices- Cost optimization opportunities also exist, for instance material sourcing. Further the organisations will be Leveraging platform capabilities and best practices.

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